As US Rates Near 5%, KOSPI Gives Back the 7,000 Mark
The yield on 10-year US Treasuries — effectively the cost of borrowing money in the United States — crept toward 5%, pulling capital out of the domestic market and sending the KOSPI below the 7,000 mark for the first time in three trading sessions. The benchmark index closed at 6,909.91, down 124 points (1.76%) from the previous session. The epicenter of the plunge was bond yields. The three-year government bond yield finished at 4.014%, breaking above 4% for the first time in two years and 10 months since November 2023, while the 10-year yield closed at 4.540%, setting a fresh high for the year.
US consumer prices rose 3.4% in August from a year earlier, and core inflation climbed 0.3% from the previous month, exceeding the forecast of 0.2% and adding to pressure for rate hikes. "If inflation risks grow any larger, bond selling pressure could pile up and push Treasury yields even higher," explained Choi Jae-won, a professor of economics at Seoul National University.
Rising oil prices and a weaker won compounded the pressure. Yemen's Houthi rebels took control of the Bab el-Mandeb Strait, creating a "double chokepoint" spanning the Red Sea and the Strait of Hormuz. West Texas Intermediate crude surged 6.69% to $102.48 a barrel, and Brent also climbed above the $100 mark. Against this backdrop, the won-dollar exchange rate rose 6.7 won to 1,345.9.
Large caps were broadly in the red. Samsung Electronics closed down 3.53% at 259,500 won, SK hynix slipped 2.21% to 1,812,000 won, and SK Square dropped 4.05%. Semiconductor equipment stocks, which had surged to their peaks on expectations of an AI boom, fell even harder: Wonik IPS plunged 7.15%, Jusung Engineering 5.43%, and PSK 5.60%.
Despite the index's sharp fall, money flowed back into the stock market. Over the five days since the 4th of this month, 18.9525 trillion won drained out of money market funds (MMFs), while investor deposits grew by 14.1073 trillion won to 107.6573 trillion won. Margin lending balances also rose to 32.3599 trillion won, extending an uptrend that began on the 4th of last month. "This suggests the supply-demand balance is shifting toward the buy side compared with before," said Kang Jin-hyuk, an analyst at Shinhan Investment Corp.
Next week brings a monetary policy "big week." The US Federal Open Market Committee (FOMC) meets on the 15th and 16th, followed by the Bank of Japan's monetary policy meeting on the 17th and 18th. The CME FedWatch at one point priced in as much as a 90% probability of a 0.25-percentage-point rate hike at this FOMC meeting.
